FNCB Bancorp, Inc. Reports Increase in First Quarter 2019 Earnings

Company Release - 4/22/2019 4:05 PM ET

DUNMORE, Pa., April 22, 2019 (GLOBE NEWSWIRE) -- FNCB Bancorp, Inc. (NASDAQ: FNCB), the parent company of Dunmore-based FNCB Bank (the “Bank”), today reported net income of $2.6 million, or $0.14 per basic and diluted share, for the three months ended March 31, 2019, an increase of $0.6 million, or 30.5%, compared to net income of $2.0 million, or $0.12 per basic and diluted share, for the same three months of 2018. The increase in first quarter earnings reflected a credit for loan and lease losses in 2019 compared to a provision in 2018 and an increase in net interest income, partially offset by moderately higher non-interest expense. Return on average assets and return on average shareholders’ equity were 0.86% and 9.70%, respectively, for the first three months of 2019, compared to 0.70% and 9.44%, respectively for the same three months of 2018.

First Quarter 2019 Highlights:

30.5% increase in net income comparing the first quarters of 2019 and 2018;

Successfully completed a $23.0 million common stock offering;

Total risk-based capital and Tier I Leverage ratios improved to 15.06% and 10.45% at March 31, 2019 compared to 12.69% and 8.50% at December 31, 2018, respectively;

Accelerated final payment on subordinated debt; and

Increased first quarter dividend by 25.0% comparing 2019 and 2018.

“Our first quarter operating results provides us with a solid start to 2019,” stated Gerard A. Champi, President and Chief Executive Officer. "The current rate environment and the highly competitive marketplace in which we operate has started to place pressure on our net interest margin, as increases in funding costs have outpaced earning asset yields. One of our foremost strategic objectives is growing core deposit relationships, which will benefit our liquidity position and assist us in managing funding costs," continued Champi. "We remain focused on creating efficiency within the balance sheet through effective asset/liability management initiatives in order to build on our first quarter results," Champi concluded.

Summary Results

For the three months ended March 31, 2019, tax-equivalent net interest income increased $0.1 million, or 1.1% to $9.1 million from $9.0 million for the same three months of 2018. Specifically, comparing the first quarters of 2019 and 2018, a $1.2 million, or 11.4%, increase in tax-equivalent interest income was almost entirely offset by a $1.1 million, or 70.5%, increase in interest expense. FNCB’s tax-equivalent net interest margin for the first quarter of 2019 contracted 12 basis points to 3.14% compared to 3.26% for the same quarter of 2018. The margin contraction primarily reflected a 42 basis-point increase in the cost of funds to 1.11% for the three months ended March 31, 2019 from 0.69% for the same three months of 2018. The increase in funding costs almost entirely offset the effects of strong earning asset growth and a 23 basis-point increase in the tax-equivalent yield on earning assets. Average earning assets grew $57.3 million, or 5.2%, to $1.157 billion for the three months ended March 31, 2019 from $1.100 billion for the same period of 2018, while tax-equivalent earning-asset yields improved 23 basis points to 4.06% for the three months ended March 31, 2019 compared to 3.83% for the three months ended March 31, 2018. Average interest-bearing liabilities increased $52.8 million, or 5.8%, to $961.9 million for the first quarter of 2019 from $909.2 million for the same quarter of 2018. The growth in interest-bearing liabilities resulted in only a negligible increase in interest expense, as the impact of a $97.0 million, or 12.0%, increase in average interest-bearing deposits was almost entirely mitigated by a $44.3 million , or 43.1%, reduction in average borrowed funds. For purposes of presenting net interest income, earning-asset yields and net interest margin information on a tax-equivalent basis, tax-free interest income is adjusted using the statutory federal corporate income tax rate of 21.0% for the three months ended March 31, 2019 and 2018.

Non-interest income was $1.5 million for the three months ended March 31, 2019 and 2018. FNCB realized net gains on the sale of available-for-sale debt securities of $160 thousand for the first quarter of 2019. There were no gains on the sale of available-for-sale debt securities realized during the same period of 2018. Additionally, other income increased $112 thousand to $392 thousand for the three months ended March 31, 2019 from $280 thousand for the same three months of 2018. Partially offsetting these positive factors were decreases in net gains on the sales of SBA guaranteed loans and other real estate owned. During the first quarter of 2018, FNCB realized net gains on the sales of SBA guaranteed loans and other real estate owned of $251 thousand and $38 thousand, respectively. The were no such gains realized in the first quarter of 2019.

For the three months ended March 31, 2019, non-interest expense increased by $193 thousand, or 2.7%, to $7.4 million from $7.2 million for the comparable three months of 2018. The increase primarily reflected increases in salaries and employee benefits and data processing costs, partially offset by reductions in occupancy expense and other operating expenses.

Asset Quality

FNCB's asset quality weakened slightly as total non-performing loans increased $1.5 million to $6.2 million, or 0.74% of total loans, at March 31, 2019 from $4.7 million, or 0.56%, of total loans at December 31, 2018. FNCB’s loan delinquency rate (total delinquent loans as a percentage of total loans) was 1.28% at March 31, 2019 compared to 0.93% at December 31, 2018. The increase in non-performing loans and loan delinquencies was primarily attributable to two commercial relationships that were placed on non-accrual status during the first quarter of 2019. The allowance for loan and lease losses was $9.3 million, or 1.10% of total loans outstanding, at March 31, 2019, compared to $9.5 million, or 1.13% of total loans outstanding, at December 31, 2018. Management is actively managing problem credits through heightened workout efforts focused on developing strategies to resolve borrower difficulties through liquidation of collateral and other appropriate means. Net charge-offs were $112 thousand, or an annual rate of 0.05% of average loans, for the three months ended March 31, 2019 compared to $192 thousand, or an annual rate of 0.10% of average loans, for the same three months of 2018. FNCB recorded a credit for loan and leases losses of $154 thousand for the first quarter of 2019 compared to a provision for loan and lease losses of $720 thousand for the same quarter of 2018. The $874 thousand variance primarily reflected a decrease in historical net charge-off rates.

Financial Condition

Total assets were $1.214 billion at March 31, 2019, a decrease of $23.3 million, or 1.9%, from $1.238 billion at December 31, 2018. The moderate contraction in total assets primarily reflected a $21.9 million, or 7.4%, decrease in available-for-sale securities to $274.1 million at March 31, 2019 from $296.0 million at December 31, 2018. The proceeds from the sale of securities was used to supplement cyclical deposit trends and minimize wholesale funding utilization. Total deposits decreased $55.5 million, or 5.1%, to $1.040 billion at March 31, 2019 from $1.096 billion at December 31, 2018, which largely reflected the cyclical deposit trends of municipal customers. Loans, net of net deferred costs and unearned income, were $838.9 million at March 31, 2019, a slight decrease of $0.2 million compared to $839.1 million at December 31, 2018. Total borrowed funds increased $5.1 million to $39.3 million at March 31, 2019 from $34.2 million at December 31, 2018, reflecting a $10.0 million increase in FHLB of Pittsburgh advances partially offset by a $5.0 million principal repayment on the subordinated debt.

Total shareholders’ equity increased $26.6 million, or 27.3%, to $123.8 million at March 31, 2019 from $97.2 million at December 31, 2018. FNCB successfully completed a public offering of its common stock, which resulted in a net increase to capital after offering expenses of $21.3 million. Also factoring into the capital improvement was net income for the three months ended March 31, 2019 of $2.6 million and a $3.6 million decrease in accumulated other comprehensive loss related to appreciation in the fair value of available-for-sale debt securities, net of deferred taxes, partially offset by dividends declared of $1.0 million. FNCB’s total risk-based capital and Tier I leverage ratios improved to 15.06% and 10.45%, respectively, at March 31, 2019 from 12.69% and 8.50%, respectively, at December 31, 2018. Dividends declared and paid for the first quarter were $0.05 per share in 2019, an increase of 25.0% from $0.04 per share in 2018. The dividend payout ratio, dividends declared divided by net income, was 38.2% and 33.2% for the three months ended March 31, 2019 and 2018, respectively.

Availability of Filings

Copies of FNCB’s most recent Annual Report on Form 10-K and Quarterly Reports on form 10-Q will be provided upon request from: Shareholder Relations, FNCB Bancorp, Inc., 102 East Drinker Street, Dunmore, PA 18512 or by calling (570) 348-6419. FNCB’s SEC filings including its Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are also available free of charge on the Investor Relations page of the FNCB’s website, www.fncb.com, and on the SEC website at: http://www.sec.gov/edgar/searchedgar/companysearch.html

About FNCB Bancorp, Inc.:FNCB Bancorp, Inc. is the bank holding company of FNCB Bank. Locally-based for over 100 years, FNCB Bank continues as a premier community bank in Northeastern Pennsylvania – offering a full suite of personal, small business and commercial banking solutions with industry-leading mobile, online and in-branch products and services. FNCB currently operates through 16 community offices located in Lackawanna, Luzerne and Wayne Counties and a limited purpose office in Lehigh County, and remains dedicated to making its customers’ banking experience simply better. For more information about FNCB, visit www.fncb.com.

FNCB may from time to time make written or oral “forward-looking statements,” including statements contained in our filings with the Securities and Exchange Commission (“SEC”), in its reports to shareholders, and in other communications, which are made in good faith by us pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

These forward-looking statements include statements with respect to FNCB’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond our control). The words “may,” “could,” “should,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “intend,” “plan” and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause FNCB’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements: the strength of the United States economy in general and the strength of the local economies in our markets; the effects of, and changes in trade, monetary, fiscal and tax policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System; inflation, interest rate, market and monetary fluctuations; the timely development of and acceptance of new products and services; the ability of FNCB to compete with other institutions for business, including for deposit and loan growth: the composition and concentrations of FNCB’s lending risk and the adequacy of FNCB’s reserves to manage those risks; the valuation of FNCB’s investment securities; the ability of FNCB to pay dividends or repurchase common shares; the ability of FNCB to retain key personnel; the impact of any pending or threatened litigation against FNCB; the marketability of shares of FNCB stock and fluctuations in the value of FNCB’s share price; the effectiveness of FNCB’s system of internal controls; the ability of FNCB to attract additional capital investment; the impact of changes in financial services’ laws and regulations (including laws concerning capital adequacy, taxes, banking, securities and insurance); the ability of FNCB to identify future acquisition targets, complete acquisitions and integrate new teams into FNCB’s operations; the impact of technological changes and security risks upon our information technology systems; changes in consumer spending and saving habits; the nature, extent, and timing of governmental actions and reforms, and the success of FNCB at managing the risks involved in the foregoing and other risks and uncertainties, including those detailed in FNCB’s filings with the SEC.

FNCB cautions that the foregoing list of important factors is not all inclusive. Readers are also cautioned not to place undue reliance on any forward-looking statements, which reflect management’s analysis only as of the date of this report, even if subsequently made available by FNCB on its website or otherwise. FNCB does not undertake to update any forward-looking statement, whether written or oral, that may be made from time to time by or on behalf of FNCB to reflect events or circumstances occurring after the date of this report.

Readers should carefully review the risk factors described in the Annual Report and other documents that FNCB periodically files with the Securities and Exchange Commission, including its Form 10-K for the year ended December 31, 2018.

FNCB Bancorp, Inc.Selected Financial Data

Mar 31,

Dec 31,

Sept 30,

Jun 30,

Mar 31,

2019

2018

2018

2018

2018

Per share data:

Net income (fully diluted)

$

0.14

$

0.42

$

0.11

$

0.14

$

0.12

Cash dividends declared

$

0.05

$

0.05

$

0.04

$

0.04

$

0.04

Book value

$

6.16

$

5.78

$

5.15

$

5.18

$

5.17

Tangible book value

$

6.16

$

5.78

$

5.15

$

5.18

$

5.17

Market value:

High

$

10.68

$

10.39

$

12.00

$

10.00

$

9.98

Low

$

7.14

$

8.21

$

7.97

$

8.01

$

7.01

Close

$

7.70

$

8.44

$

9.77

$

8.88

$

9.24

Common shares outstanding

20,108,560

16,821,371

16,819,471

16,817,097

16,766,600

Selected ratios:

Annualized return on average assets

0.86

%

2.26

%

0.59

%

0.79

%

0.70

%

Annualized return on average shareholders' equity

9.70

%

32.26

%

8.41

%

11.23

%

9.44

%

Efficiency ratio

71.24

%

47.59

%

67.11

%

63.94

%

68.78

%

Tier I leverage ratio

10.45

%

8.50

%

7.66

%

7.69

%

7.80

%

Total risk-based capital to risk-adjusted assets

15.06

%

12.69

%

11.42

%

11.31

%

11.70

%

Average shareholders' equity to average total assets

8.89

%

7.00

%

7.00

%

7.05

%

7.38

%

Yield on earning assets (FTE)

4.06

%

4.06

%

4.04

%

3.96

%

3.83

%

Cost of funds

1.11

%

1.04

%

1.00

%

0.84

%

0.69

%

Net interest spread (FTE)

2.95

%

3.02

%

3.04

%

3.12

%

3.15

%

Net interest margin (FTE)

3.14

%

3.17

%

3.21

%

3.26

%

3.26

%

Total delinquent loans/total loans

1.28

%

0.93

%

0.90

%

0.71

%

0.73

%

Allowance for loan and lease losses/total loans

1.10

%

1.13

%

1.14

%

1.11

%

1.18

%

Non-performing loans/total loans

0.74

%

0.56

%

0.51

%

0.41

%

0.30

%

Annualized net charge-offs/average loans

0.05

%

0.05

%

0.36

%

0.47

%

0.10

%

FNCB Bancorp, Inc.Year-to-Date Consolidated Statements of Income

Three Months Ended

March 31,

(in thousands, except share data)

2019

2018

Interest income

Interest and fees on loans

$

9,407

$

8,288

Interest and dividends on securities

U.S. government agencies

893

890

State and political subdivisions, tax-free

37

20

State and political subdivisions, taxable

1,021

1,024

Other securities

205

195

Total interest and dividends on securities

2,156

2,129

Interest on interest-bearing deposits in other banks

46

23

Total interest income

11,609

10,440

Interest expense

Interest on deposits

2,238

1,067

Interest on borrowed funds

Interest on Federal Home Loan Bank of Pittsburgh advances

287

352

Interest on subordinated debentures

24

56

Interest on junior subordinated debentures

114

87

Total interest on borrowed funds

425

495

Total interest expense

2,663

1,562

Net interest income before (credit) provision for loan and lease losses

8,946

8,878

(Credit) provision for loan and lease losses

(154

)

720

Net interest income after (credit) provision for loan and lease losses

9,100

8,158

Non-interest income

Deposit service charges

685

702

Net gain on the sale of securities

160

-

Net gain (loss) on equity securities

12

(19

)

Net gain on the sale of mortgage loans held for sale

56

49

Net gain on the sale of SBA guaranteed loans

-

251

Net gain on the sale of other real estate owned

-

38

Loan-related fees

79

84

Income from bank-owned life insurance

131

134

Other

392

280

Total non-interest income

1,515

1,519

Non-interest expense

Salaries and employee benefits

3,899

3,666

Occupancy expense

550

603

Equipment expense

307

314

Data processing expense

781

648

Regulatory assessments

168

201

Bank shares tax

278

267

Professional fees

332

296

Insurance expense

126

135

Other operating expenses

984

1,102

Total non-interest expense

7,425

7,232

Income before income taxes

3,190

2,445

Income tax expense

555

426

Net income

$

2,635

$

2,019

Income per share

Basic

$

0.14

$

0.12

Diluted

$

0.14

$

0.12

Cash dividends declared per common share

$

0.05

$

0.04

Weighted average number of shares outstanding:

Basic

18,720,502

16,763,401

Diluted

18,733,652

16,789,336

FNCB Bancorp, Inc.Quarter-to-Date Consolidated Statements of Income

Three Months Ended

Mar 31,

Dec 31,

Sept 30,

Jun 30,

Mar 31,

(in thousands, except share data)

2019

2018

2018

2018

2018

Interest income

Interest and fees on loans

$

9,407

$

9,561

$

9,501

$

9,031

$

8,288

Interest and dividends on securities

U.S. government agencies

893

890

899

886

890

State and political subdivisions, tax-free

37

38

37

38

20

State and political subdivisions, taxable

1,021

1,026

1,028

1,027

1,024

Other securities

205

167

211

240

195

Total interest and dividends on securities

2,156

2,121

2,175

2,191

2,129

Interest on interest-bearing deposits in other banks

46

36

17

12

23

Total interest income

11,609

11,718

11,693

11,234

10,440

Interest expense

Interest on deposits

2,238

2,165

1,559

1,134

1,067

Interest on borrowed funds

Interest on Federal Home Loan Bank of Pittsburgh advances

287

251

715

707

352

Interest on subordinated debentures

24

57

58

57

56

Interest on junior subordinated debentures

114

108

106

99

87

Total interest on borrowed funds

425

416

879

863

495

Total interest expense

2,663

2,581

2,438

1,997

1,562

Net interest income before (credit) provision for loan and lease losses

8,946

9,137

9,255

9,237

8,878

(Credit) provision for loan and lease losses

(154

)

(199

)

1,149

880

720

Net interest income after (credit) provision for loan and lease losses

TERMS AND CONDITIONS OF USE

The investor relations site ("Site") with which this document is associated is maintained by S&P Global Market Intelligence ("S&P") on behalf of the organization featured on the Site (S&P's "Client"). These Terms and Conditions of Use ("Terms of Use") set forth the terms on which you may use the Site, and the information and materials contained therein (the "Contents"). By using the Site, you agree to these Terms of Use. If you do not agree to these Terms of Use, you are not authorized to use the Site or Contents in any manner, and you should immediately discontinue any use of the Site or the Contents.

S&P and/or its Client shall have the right at any time to modify or discontinue any aspect of the Site or any part of the Contents. S&P may also modify these Terms of Use without notice. You agree to monitor these Terms of Use, and to cease all access or use of the Site if you no longer agree to abide by the Terms of Use. Your continued use of the Site shall constitute acceptance of such modification.

S&P and the Client grant to you a limited, personal license to access the Site and to access and download the Contents, but only for your own personal, family and household use. You may not use, reproduce, distribute or display any portion of the Site for any other purpose, including without limit any commercial purpose. You may use the Site and the Contents for lawful purposes only. S&P and Client reserve all rights not expressly granted, including the right to terminate your use of the Site without notice.

The Site contains copyrighted material, trademarks and service marks, and other proprietary information, including but not limited to text, software, and graphics, which materials are owned by S&P and/or its Client. S&P and Client reserve all rights in the Contents. You agree not to reproduce, distribute, sell, broadcast, publish, retransmit, disseminate, circulate or commercially exploit the Site or the Contents without the express written consent of S&P and the Client.

You agree to access the Contents and the Site manually, by request, and not automatically, through the use of a program, or other means. You agree not to take any action, alone or with others, that would interfere with the operation of the Site, to alter the Site in any way, or to impede others' access to and freedom to enjoy and use the Site as made available by S&P and S&P’s Client.

THE SITE AND THE CONTENTS ARE PROVIDED ON AN "AS IS" BASIS. S&P, ITS CLIENT, AND ANY OTHER PROVIDERS OF THE INFORMATION EXPRESSLY DISCLAIM ALL WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY WARRANTY OF ACCURACY, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR NON-INFRINGEMENT.

NEITHER, S&P, THE CLIENT NOR EITHER OF THEIR AFFILIATES, SHAREHOLDERS, OFFICERS, EMPLOYEES, AGENTS OR REPRESENTATIVES SHALL BE LIABLE FOR ANY INDIRECT, INCIDENTAL, EXEMPLARY , PUNITIVE SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RELATING TO THE SITE, THE USE OF OR INABILITY TO USE THE SITE, OR THE CONTENTS, EVEN IF SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN PARTICULAR, S&P WILL NOT BE LIABLE FOR ANY LOSS OR DAMAGE CAUSED BY YOUR RELIANCE ON INFORMATION OBTAINED THROUGH THE SITE.

It is your responsibility to evaluate the accuracy, completeness or usefulness of any of the Contents available on the Site. Please seek the advice of professionals regarding the evaluation of any of the information on the Site.

The Site does not represent an offer or solicitation with respect to the purchase or sale of any security.

These Terms of Use are the entire agreement between the parties with respect to its subject matter, and it can be amended only via written agreement by S&P. These terms and conditions shall be governed by the law of New York, without regard to principals of conflicts or choice of laws.